The RNAi interference (RNAi) pathway has excited biologists and clinicians, since it provides a means to silence nearly any gene, include pathogenic gene expression. This is because the active intermediates, the small interfering RNAs (siRNAs) have great promise as therapeutics. The proposed studies intend to advance our basic understanding of the RNAi pathway and at the same time develop powerful tools for performing silencing by small RNAs. The proposed studies are geared towards the analysis of the activity of siRNAs on DNA. We describe a novel method to inexpensively and rapidly generate thousands of specific short hairpin (shRNA) targeting any gene, thus bypassing a common limitation in RNAi experiments. We have developed a mouse model for studying RNAi pathways and will use this to explore the mechanism behind silencing of repetitive DNA via formation of small-RNA directed heterochromatin. In addition, we will the above systems to explore the importance of position and sequence of the shRNA and cognate target site on the DNA. Finally, we describe the production of mice that report on the ectopic introduction of a silencing RNA. We envision that this mouse will be an important reagent for testing the uptake and activity of siRNAs in specific tissues, which is an important if siRNAs are to become use in therapeutic intervention of human disease. Lay language relevance to public heath: The introduction of double-stranded RNA into an organism causes specific interference of gene expression termed RNA interference (RNAi). Unfortunately much remains to be understood regarding the RNAi pathway in cells, especially how to achieve RNAi in cells and tissues. These studies describe our efforts to develop new means of performing RNAi in mouse models and should shed insight into the biology of small RNAs. Our studies are unique since we exploit the activity of small RNAs in the nucleus, where we can prevent pathogenic genes from being expressed from the DNA.